Whitbread warns of price hikes over national living wage plan

The owner of Premier Inn and Costa Coffee warned it will have to hike prices as it faces a "substantial" hit from plans for a new national living wage.

Whitbread, which is one of the UK's biggest employers with more than 45,000 staff, said it was working on plans to offset the cost of next year's introduction of a £7.20 an hour national living wage.

This will include "selective" price increases, as well as moves to improve productivity and make general savings across the business, according to the group.

It will confirm more details on October 20, when it reports half-year financial results.

The firm - which also owns restaurant brands Beefeater, Brewers Fayre, Table Table and Taybarns - is the latest in a line of major firms to warn over the impact of the living wage, which was announced by Chancellor George Osborne in his summer budget.

From next April, firms will have to pay all workers aged over 25 at least £7.20 an hour - up from the current national minimum wage of £6.50.

It will mean significant wage cost increases for a raft of firms, including retailers, restaurant firms and pub groups.

Chief executive Andy Harrison said: "We are developing plans to adopt the recently announced national living wage.

"We shall mitigate this substantial cost increase over time with a combination of productivity improvements, boosted by investment in systems and training, efficiency savings and some selective price increases."

Whitbread's comments came as the firm also revealed slowing sales growth over the summer and said trading was weaker-than-expected last month.

Comparable sales growth slowed to 3.3% in the 11 weeks to August 13, down from 4.3% in the previous three months.

Mr Harrison said: "August is often affected by weather and holiday patterns and trading this August, across all our brands, was softer than expected against strong comparatives from an excellent month last year."

Shares in the group fell 3%.

Whitbread said it remained on track to meet market expectations for its full-year results despite the weaker summer trading.

It also stuck by plans to add another 5,500 rooms across the budget Premier Inn hotel chain, open around 220 new Costa stores worldwide and to install 700 to 800 new Costa Express machines in this financial year.